Adaptive Markets Hypothesis for Islamic Stock Portfolios: Evidence from Dow Jones Size and Sector-Indices

Abstract

International audienceThis paper analyzes the degree of return predictability (or weak-form informational efficiency) of Dow Jones Islamic and conventional size and sectorindices using the data from 1996 to 2013. Employing the automatic portmanteau and variance ratio tests for the martingale difference hypothesis of asset returns, we find that all Islamic and conventional portfolio returns have been predictable in a number of periods, consistent with the implications of the adaptive markets hypothesis. Overall, Islamic portfolios exhibit a higher degree of informational efficiency than the conventional ones, especially in the Consumer Goods, Consumer Services, Financials and Technology sectors. We also find that Islamic portfolios tend to be more efficient than the conventional ones during crisis period

Do Islamic Holy days affect stock returns? Empirical evidence from Asian and African markets

“…A number of studies have compared the performance of Islamic and conventional stock indices (Al-Khazali et al , 2016; Jawadi et al , 2015; Guyot, 2011; Hassan, 2002). In addition to these, Sensoy et al (2015) and Charles et al (2015) focused on predictive dynamics of Islamic and conventional stock indices and their sectoral performance, no examination has used a time varying measure to assess the efficient market hypothesis.…”